Financial Restatement Paper

The Ignite Restaurant Group discloses to the public a mistake in its prior financial statements. “The Company has determined it necessary to correct non-cash related errors related to its accounting treatment of certain leases. (Health and Beauty Close – Up, 2012 )” Due to finding the accounting error the company decided to conducted a “detailed review of its historical accounting for fixed assets and related depreciation expense in prior periods as a private company ( Health and Beauty Close-Up, 2012)”. The accounting errors date back to when the company was created in 2006. “The adjustments to the financial statements errors will reflect non-cash charges primarily relating to deferred rent”. (Health and Beauty Close-Up, 2012) The company will additionally review its fixed assets and inventory assessments within its financial statements.

The accounting principals involved is that the company has counterbalancing errors it has failed to record depreciation of its leases and properly expense its fixed assets. The company in the past “when accounting for leases that included stated fixed rent increases, the Company recognized rent expense on a straight line basis over the current lease term with the term primarily commencing when actual rent payments began” (Health and Beauty Close-Up, 2012). The company has decided “its previous issued financial statements will recognize rent expenses on a straight line basis over the effective lease term, including cancelable option periods where failure to exercise such options would result in an economic penalty”. (Health and Beauty Close-Up, 2012) The company’s “changes to the recognition of rent expenses are timing in nature and do not change the total cash payments or aggregate rent expense over the effective life of the lease”. (Health and Beauty Close-Up, 2012)

The effects of the errors and the related accounting changes will date back to 2006 through 2012, which will range from 3.4 million to 3.8 million. (Health...